The former Croatia international joined Milan in January on a six-month deal but ankle and muscle injuries have restricted him to just five appearances so far, with the last coming in the 2-2 Europa League draw with Red Star Belgrade on Feb. 18.
As a result, Mandzukic has asked the club for his wage contribution to be donated instead to the Milan Foundation.
"[It is] an incredible gesture, which shows Mario Mandzukic's ethics and professionalism as well as his respect for Milan," club president Paolo Scaroni said.
"This means the club will have the opportunity to continue to support the Milan Foundation's projects which help the underprivileged youth, where sport works as instrument for social inclusion."
The 34-year-old was an integral part of the Croatia side which reached the 2018 World Cup final.